Wealthy Sheikh Riyadh (Omar Sharif) has sent his attaché Aziz (Adam Alexi-Malle) to ask the show to either stop using the phrase "the world's greatest distance horse and rider" or allow Hopkins and Hidalgo to prove themselves by entering the Middle Eastern "Ocean of Fire" race: an annual 3,000-mile survival race across the Najd desert region. The Sheikh is custodian of the al-Khamsa line, considered to be the greatest distance horses in the world, and traditionally the race has been restricted to pure-bred Arabian horses and Bedouin or Arab riders.

In addition to the grueling conditions, prevailing animosity and contempt for a Christian "infidel" and “impure” horse, horse and rider face stiff competition, including the wealthy and unscrupulous British horse breeder Lady Anne Davenport (Louise Lombard).

To complicate matters, Sheikh Riyadh has promised his daughter Jazira Jazeera (Zuleikha Robinson), his only surviving child, in marriage to the rider of his horse, should he win. She hopes to prevent this by giving Hopkins advice and information to help him win, thereby resulting in greater danger for them both. Sheikh Riyadh's outcast brigand nephew, who will stop at nothing to gain control of the al-Khamsa line, raids the race camp, kidnaps Jazira, and threatens to kill her unless he gets his uncle's prize stallion racer as her ransom. Hopkins manages to rescue Jazira. However, Davenport and the Sheikh's nephew try to sabotage the race by eliminating the rival riders, but are thwarted when Hopkins kills the nephew.

For Hopkins the Ocean of Fire becomes not only a matter of pride, honor and survival, but of identity as well: it emerges that his father was European American while his mother was Lakota Sioux. The Lakota call him “Blue Child” or “Far Rider.” As a half-breed he feels sympathy and pity for his mother's people, but does not generally reveal his heritage, especially after the Wounded Knee massacre, for which he feels partly responsible. Jazira compares his relation to his heritage to her desire to avoid wearing the veil, saying that he mustn't "go through life hiding what God made you....like me."

Nearing the end of the race, Hidalgo is severely injured and Hopkins is dying of thirst. He considers shooting Hidalgo to end his suffering, but is unable to bring himself to do it. Kneeling, he chants a prayer to Wakan Tanka as a possible death song, and images of Lakota elders and his mother appear before him before Hidalgo suddenly struggles up, and Hopkins rides bareback to come from behind win the race. Hopkins wins the respect and admiration of the Arabs, and becomes friends with the Sheikh, giving him his revolver as a gift. As he bids farewell to an unveiled Jazira, she asks him if he is fulfilling the traditional Western tales' ending where the cowboy rides away into the setting sun and calls him Blue Child as she smiles kindly at him and turns to go.

Returning to the United States, Hopkins uses his winnings to buy a herd of mustangs about to be killed by government order, in what was an attempt by the US government to eliminate mustangs and force Native Americans to convert to farming. Hopkins has the horses released and frees Hidalgo to join them in the wild. The epilogue states that Hopkins went on to reportedly win 400 long-distance races and was an outspoken supporter for wild mustangs until his death in 1951, while Hidalgo's descendants live free in the wild in and around Oklahoma.

The Native American historian Vine Deloria questioned Hopkins' claims of Lakota ancestry, as presented uncritically in the film.[1][2]

But, Nakota filmmaker Angelique Midthunder said during the controversy that "the story of the half Indian who took his pinto mustang across the sea to race in the big desert has been told to children of the northern plains tribes for generations."[3] Lakota elder Sonny Richards writes, "Kaiyuzeya Sunkanyanke (Frank Hopkins) was a South Dakota native and Lakota half-breed." [3]

Based on Hopkins' account of his mixed-race ancestry, the movie production employed Lakota historians, medicine men, and tribal leaders as consultants to advise during every scene that represented their culture. Many of the Ghost Dancers who reenact the sacred ceremony of 1890 in Hidalgo had participated in the film Thunderheart (1992) and the mini-series Dreamkeeper, both written by Fusco. The screenwriter was adopted as an honorary relative of the Oglala Nation in a Hunkyapi ceremony (Making of Relatives) on September 3, 1989 on the Pine Ridge Indian Reservation.[citation needed]

Because the Disney Corporation marketed the movie as a true story, some historians criticized the film both because of the legendary status of Hopkins' claims and for the film's divergence from his accounts.[4] They contend that many of the events, especially the featured race, never took place.[5] Historians of distance riding said that most of Hopkins' claims as depicted in the film, including the race, have been 'tall tales' or hoaxes.[6]

The film says that descendants of the horse Hidalgo, for which the movie was named, live among the Gilbert Jones herd of Spanish Mustangs on Blackjack Mountain in Oklahoma. By Hopkins' original account, he decided to leave his horse in Arabia after the race.[6]

In 2006, John Fusco, the screenwriter of Hidalgo, responded to criticism about the historical basis of the film. He had done research on Hopkins for years. He said that he used parts of Hopkins' 1891 desert memoirs (unpublished during the rider's lifetime) and "heightened the 'Based On' story to create an entertaining theatrical film." He held that the story of the man and his horse is true. Fusco offered quotes from surviving friends of Hopkins, notably former distance riders Walt and Edith Pyle, and Lt Col William Zimmerman, along with information found in horse history texts, as verification.[6]

According to the Longriders Guild, the Yemen Government, United Arab Emirates and Saudi Arabian Government say officially that there has never been an "Ocean of Fire" race. Hopkins never named the event; he referred to it in his writings as an annual ceremonial ride in the region.[6] According to the Arab historian Dr. Awad al-Badi, such a lengthy race was impossible. He said,

"There is no record or reference to Hopkins with or without his mustangs ever having set foot on Arabian soil. The idea of a historic long-distance Arab horse race is pure nonsense and flies against all reason. Such an event in Arabia any time in the past is impossible simply from a technical, logistical, cultural and geopolitical point of view. It has never been part of our rich traditions and equestrian heritage."[7]

The movie received mixed reviews from mainstream critics, receiving a 47% approval rating from Rotten Tomatoes and a 54 from Metacritic.

Roger Ebert offered a positive review of the film (three out of four stars), saying it's "Bold, exuberant and swashbuckling," the kind of fun, rip-snorting adventure film Hollywood rarely makes anymore. He added, "please ignore any tiresome scolds who complain that the movie is not really based on fact. Duh."[8]

Several American Paint horses were used to portray Hidalgo. The actor Viggo Mortensen later bought RH Tecontender, one of the horses used in the film. The screenwriter John Fusco bought Oscar, the main stunt horse, and retired him at Red Road Farm, his American Indian horse conservancy.

^Andrew Gumbel (10 March 2004). "Disney rides into trouble with story of cowboy who conquers the Middle East". The Independent. Retrieved 2011-08-14. Vine Deloria of the University of Colorado, is furious at the uncritical repetition of Hopkins' claims about his role in Sioux history. He wrote: "Hopkins' claims are so outrageously false that one wonders why Disney were attracted to this material at all, except of course the constant propensity to make money under any conditions available."

^"Dr. Vine Deloria Jr. denounces Frank Hopkins as a fraud". Longriders Guild. Hopkins claims are so outrageously false that one wonders why the Disney people were attracted to this material at all....Try this on for size - Hopkins claimed to be the grandson of Geronimo who, he confided, was really a Sioux and not an Apache at all. Hopkins, according to himself and wife, was very popular with the Indians because he was half Sioux himself, his mother being a lady called Nah-Kwa - her more formal name was Valley Naw-Kwa or "Valley of Silence" - hardly fitting for a woman who had such illustrious relatives. Hopkins spoke "the Indian language" so he was a natural interpreter for the Army - although his name does not appear on any treaty documents where the interpreters are listed or in any correspondence in government files wherein interpreters were needed.